**NICOSIA** – The Cypriot economy is poised for substantial and potentially devastating long-term repercussions stemming from escalating global temperatures and environmental degradation, according to a seminal study released on Tuesday by the Economics Research Centre (ERC) at the University of Cyprus. The research meticulously quantifies the physical risks posed by climate change, projecting significant contractions in Gross Domestic Product (GDP), investment, and consumption across various future scenarios.
The comprehensive analysis, which leverages a sophisticated model developed by the ERC, intricately links greenhouse gas emissions with rising temperatures, subsequent impacts on productivity, and the overall health of sectoral activity. This model incorporates an energy sector and a dedicated climate module, providing a granular understanding of how climatic shifts translate into tangible economic consequences. The study meticulously examined three distinct pathways for global emissions, mirroring the scenarios outlined by the Intergovernmental Panel on Climate Change (IPCC): a business-as-usual trajectory, a more moderate middle-of-the-road approach, and an ambitious sustainability-focused route.
Under the most pessimistic, business-as-usual scenario, the Cypriot economy could witness a staggering GDP loss of up to €29 billion by the year 2050. This figure escalates dramatically by the turn of the century, with potential losses reaching an astronomical €162 billion. Even under the more optimistic sustainability scenario, the economic toll remains considerable, with projected GDP losses of €4 billion by 2050 and €23 billion by 2100, underscoring the pervasive nature of climate change's economic threat. The study highlights that climate change fundamentally acts as a productivity shock, rippling through supply chains, diminishing household demand, and exerting pressure on public finances through various fiscal channels.
Sectors considered the bedrock of the Cypriot economy are identified as particularly vulnerable. The vital tourism industry, a cornerstone of national revenue, faces considerable headwinds. By 2050, under the business-as-usual scenario, tourism revenues could shrink by approximately €3.8 billion. Even with a moderate emissions reduction, losses are still projected to reach €2.4 billion, while a robust shift towards sustainability could mitigate these losses to around €500 million. Similarly, the burgeoning financial services sector is not immune, with potential losses of €2.3 billion by 2050 in the business-as-usual scenario, decreasing to €300 million under a sustainability framework. The agricultural sector, intrinsically tied to environmental conditions, is also anticipated to bear significant burdens.
Beyond direct sectoral losses, the study points to substantial implications for the island's external balance and its capacity to generate tax revenues. For instance, the considerable decline in tourism activity translates directly into forgone Value Added Tax (VAT) receipts, further exacerbating fiscal challenges. The ERC’s findings serve as a stark and urgent call to action, emphasizing that proactive and decisive mitigation and adaptation strategies are not merely environmental imperatives but also crucial for safeguarding the long-term economic prosperity and stability of Cyprus. The projected declines in GDP, investment, and consumption paint a grim picture, necessitating a fundamental re-evaluation of economic policies in light of the undeniable reality of a changing climate.